Encouraging cognitive diversity — a mix of directors with different backgrounds and skills who can add value by bringing different perspectives to the conversation — helps guards against the risk of groupthink.
“Board composition is critical,” said Dennis T. Whalen, Leader of the KPMG Board Leadership Center. “Boards need diversity that is aligned with the company’s strategy today and for the future.”
Institutional investors, proxy advisors, and other stakeholders are concerned about a lack of diversity, low director turnover, and whether the board has the right skill sets to guide the company and its strategy into the future. Investors increasingly expect a matrix that maps the diversity of a board’s skillsets. In fact, some institutional investors have said that they will withhold or vote against directors due to lack of board gender diversity.
Diversity is just one aspect of board composition. There is a broad range of issues that require focus and leadership—including succession planning, age and term limits, individual director evaluations, removal of underperforming directors, board refreshment, as well as disclosures regarding these issues.